Email of the day on the history of export growth
Comment of the Day

August 07 2019

Commentary by Eoin Treacy

Email of the day on the history of export growth

I note a few points. 

First, China was actually there on the list of top exporters in 1961. Then it disappeared and did not reappear until 35 years later. 

Second, at no time did Japan ever exceed Germany as an exporter but not once was there any paranoia in the US about Germans taking over the US economy?

Third, the UK was falling down the ranks of exporters until the pound sterling collapse in 1992 and the devaluation actually helped them recover along with the Maastricht Treaty in 1993 - giving them the access to EU export market without the monetary shackles of the Euro. And Brexiters still think Britain is better off??? 

Fourth, the gap between Germany and Japan was almost narrowing to zero until 1993, then Germany pulled away resolutely - and today exports twice as much as Japan. 

So, Germany will always stand by the Eurozone - nobody has benefitted like they have.

Eoin Treacy's view

Thanks to Bernard Tan for the above comments and this video which is one of the most illuminating on export growth and contraction on a relative basis I have seen. (Please note the file it’s 36 megabytes so it may take some time to download on slower internet connections).

The USA never spent much time worrying about being overtaken by Germany because there was never a threat of Germany competing against the USA militarily. It was taken for granted that the trade relationship between the two countries was mutually beneficial. China on the other hand is competing for first place as an exporter but is also clearly intent on competing against the USA militarily. Therefore, the trade relation and, indeed, trade deficit is not mutually beneficial which is one of the reasons for trade war and increasingly stressed relationship between the two major powers.

It is also worth considering that the focus on exports is in fact a graphic representation of the growth in trade during the secular expansion of globalisation. Export of components from one country to another and the total value of the finished product being added to the exports of the assembly centre suggest some double counting.

One of the biggest questions that springs to mind about the data used to compile the graphic is if this double counting is accounted for and additionally how is the intangible value of cloud services, social media advertising revenue or financial services accounted for?

We know that the valued added of the services sector requires considerably fewer workers so that export revenue might be rising but employment in the manufacturing sector falling. That is certainly the case for the UK and let’s not forget that one of the country’s biggest exports in the 1980s and 1990s was North Sea oil. The UK is now an energy importer and the trend is not encouraging.

The Euro is effectively the Deutsche Mark and its value would be a lot higher that it is today without the drag of the rest of the Eurozone. That puts German exports in a prime position relative to the rest of Europe and the rest of the world. That suggests Germany will eventually ride to the rescue of the European federalist movement even as populism rises both at home and abroad.

The fact that export growth does not correlate with improving standards of living for hundreds of millions of people in the OECD is an indictment of globalisation even as it has helped boost corporate profits. That is a harder phenomenon to illustrate graphically but it is the root cause behind the rise of the populism, nativism, nationalism, isolationism, trade wars, mercantilism and the other movements growing in popularity globally.

Back to top

You need to be logged in to comment.

New members registration